ACCT10001 Chapter Notes - Chapter 13: Trade Credit

• School: University of Melbourne
• Department: Accounting
• Course: ACCT10001
• Professor: Noel Boys

Document Summary

Accrued , pay as you go spontaneous source of finance. Entities like private hospital pay a high proportion of its cash expenses to wages and salaries. During normal course of business and is usually extended without formal agreement. Creditors turnover = avg trade creditors x 365 / credit purchases = x. Loan facility attached to a current (cheque) account. Discount securities, borrower receives funds less than face value with the face value being repaid at maturity. The difference between the funds received by the borrower and the funds eventually repaid to the lender represents interest and fees. The price of bills is calculated using the compound interest formula, manipulated so that the pv is the unknown factor as in the equation below. Pv=fv / (1 + i) where pv = the price of the bill or funds lent.